Finance Chapter 14

The maximum gift that can be given to another person without incurring gift taxes is

$14,000.

The best definition of estate planning is

A definite plan for managing property during one's lifetime and at one's death.

A codicil is

A document that explains, adds, or deletes provisions in an existing will.

Which of the following is not a major source of retirement income? Annuity. Public pension plan. All of these are major sources of retirement income. Personal retirement plan. Employer pension plan

All of these are major sources of retirement income.

When you retire, you will probably spend less money on

Clothing.

Social Security

Covers 97% of all American workers.

Gladys wants to set up a trust that is also known as a bypass trust, family trust, "residuary" trust, A/B trust, and exemption equivalent trust. She should set up a(n)

Credit-shelter trust.

Vesting is the right to receive the

Employer's contributions to a pension plan even if the employee leaves the company before retiring.

If you are single, you should not have beneficiaries.

False A beneficiary is a person you have named to receive a portion of your estate after your death. If you are married, your beneficiaries might be your spouse and children. If you are single, you still have beneficiaries.

Only one will may legally be written during a person's lifetime.

False Changes in your life or in the law may necessitate changes to the provisions of a will. It should be reviewed frequently so that it remains current.

Because of the potential effect of inflation, individuals should underestimate the amount of money needed for retirement.

False One should estimate high when calculating how much the prices of goods and services will rise by the time he/she retires because of inflation.

Probate is a short, quick process.

False Probate is expensive, lengthy, and public.

If a will is found to be invalid, the result is called in-probate.

False Probate is the legal process that proves a will valid or invalid.

A benefit of an employer pension plan is that taxes are eliminated.

False Taxes on an employer pension plan are tax-deferred until you start to withdraw them in retirement.

If you were born in 1960 or later, you will first become eligible to receive Social Security benefits at age 67.

False You may receive a reduced benefit at age 62, the full benefit at age 67, or an increased benefit at age 70.

A will that is usually prepared with the help of an attorney is known as a(n)

Formal will.

When conducting a financial analysis for retirement planning,

Investments should be evaluated to determine whether their income can help cover living expenses.

An employer's contribution will vary according to the company's profits in a

Profit-sharing plan.

Darlene is updating her estate planning and wants to set up a legal document that leaves $5. 34 million to her husband. She is writing a(n)

Stated amount will.

When an employer's contribution is used to buy stock in the company for its employees, it has a

Stock bonus plan.

A copy of your living will should be distributed to your family doctor to be placed in your medical file.

True

An example of a defined-contribution plan is a stock bonus plan.

True

If you subtract your liabilities from your assets, you get your net worth.

True

When estimating your budget or spending plan at retirement, you should consider all of the following except

Withdrawing all retirement savings within five years of retirement.

Multiple copies of a ______________ should be distributed to those closest to you as well as your family doctor.

living will